CEO of Marathon Oil, Clarence P. Cazalot, made an annual salary of 43.7 million last year. Not all of us are going to be making the Forbes list of the highest paid CEOs like Cazalot, but there are ways you, an Owner-Operator and the CEO of your business, can be more business savvy and start treating your trucking business like a business. Here are some tips to manage the money from your business so that you have a healthy cash flow and avoid debt.
1. Create a separate checking account from your personal account just for your business.
- All your income from your trucking business should be deposited into an operating account. Trucking expenses should be paid for out of this account. If Cazalot is taking home upwards of 43 million, Marathon Oil is probably making a healthy profit. Cazalot wouldn’t however, take out all of the profits for himself out of Marathon's business account. He gives himself a salary and a bonus check at the end of the year if the company is doing well and he can afford to do so.
- Every month you should write a “distribution check” out of your operating account to your personal checking account to cover your personal expenses. The target amount can be determined by reviewing your monthly personal and family cash requirements.
- In the event of an IRS audit, having personal finances mixed in with your business could cost you thousands of dollars since it would be impossible for you and your accountant to accurately analyze your business expenses from your personal expenses.
2. Have a reserve account.
- The best Owner-Operators have at least $5000 saved before they ever go into business. Major maintenance, tires, quarterly estimated taxes, and insurance deductibles are large costs that can put a substantial drain on your operating cash.
3. Monitor cash flow.
- Most company drivers are trained to take a weekly cash advance for their expenses on the road. With no cash management tools in place, often come payday, their paycheck is drastically reduced. Don’t make the mistake of carrying this habit forward when you become an Owner-Operator. Cash advances can cost 10 percent of the advance in transaction fees. The best Owner-Operators never take cash advances but use their business operating account to manage cash flow.
- Monitor your account and log every expense, including debit card transactions. This way you can avoid overdrafts and never come home to find bounced check notices and fees from the bank. You can also use an overdraft protection plan from your bank which will cover a bad check.
Follow these best practices for your business and we are confident they will help you become a more successful Owner-Operator and CEO, and it could result in a bigger bonus check for yourself at the end of the year.